How Rupert Murdoch-Owned Time Warner Would Impact Hollywood: Creatives Speak Out

5:00 AM PDT 7/23/2014
by
Alex Ben Block
,
Gregg Kilday

Illustration by: Kyle Hilton

Leslie Moonves, Jerry Levin and more weigh in as Murdoch's courtship of Time Warner spreads fear and an unsettling skepticism through the creative community: "Whenever Mr. Murdoch is involved in something this substantial, I go to Mass."

Jerry Levin knows how wrenching it can be to merge two giant media companies. In 2000, the then-CEO of Time Warner appeared onstage at a press conference with Steve Case, then-chairman of AOL, to announce a $164 billion merger. The news stunned both Hollywood and Wall Street. AOL Time Warner stock soon plummeted, shareholders revolted and Jeff Bewkes, Time Warner's current CEO, would later call the deal "the biggest mistake in corporate history."

Now Time Warner is dealing with a new suitor in Rupert Murdoch's 21st Century Fox, which is offering $85 per share for TW, or $80 billion. And Levin, who now lives in Washington, D.C., and Maine and is involved in health care startups, acknowledges that such high-stakes Wall Street power plays can affect the fragile ecosystem of talent in the entertainment industry. "It's unsettling," says Levin. If Fox were to succeed in taking over Time Warner, "there will be this massive dislocation," he predicts.

Many in Hollywood agree. If there's anything that creative types fear, it's uncertainty. And word that Murdoch, 83, is on the prowl for the home of Warner Bros., HBO and the Turner networks has sent a wave of anxiety through a town whose citizens perpetually dread unemployment. "You hear an announcement, you say, 'How is it going to affect me?' " admits CBS president and CEO Leslie Moonves. He says he flashed back to 1989 when Warners bought Lorimar Television, where he then worked. "They kept two different television labels going for about a year and a half, and then they decided it didn't make sense to have two labels and they combined them." Producer Mark Johnson (Breaking Bad) concurs: "You're always worried, 'Is this going to reduce the number of buyers?' " Fox maintains that if a deal goes through, it would keep the Fox and Warners film and TV units (and their Century City and Burbank studio lots) separate, instead saving $1 billion in costs by combining sales and "backend" staffs. But not everyone is buying it. An exec at one of the two studios acknowledges that the proposed deal probably would be bad for filmmakers, saying, "There would be one less buyer."

In fact, argues writer-producer Marshall Herskovitz (thirtysomething), a Fox-Time Warner combination only would underscore an industry trend. "We've seen in the last 15 years that the consolidation of these companies and their increasingly tight hold over intellectual property have a deleterious effect on the creative community," he says. Competition "has been diminished almost to the point of nonexistence. If Fox decides to pay screenwriters less money, Warners doesn't say, 'Great, look at the great screenwriters we can get.' Instead they say, 'Great, let's pay less money also.' Now imagine what happens if Fox and Warner Bros. are the same company."

The two companies are viewed as having dramatically different cultures: The Fox film studio, which released 14 films in 2013 (plus eight via specialty label Fox Searchlight), is known for keeping a tight rein on budgets for everyone but favored filmmakers such as James Cameron. Warners, which released 18 films last year, has a reputation for investing heavily in filmmaker-driven tentpoles. On the TV side, WBTV, with 60 shows in production, is known for genre fare (Arrow) and broad comedy (The Big Bang Theory); 20th TV has about 40 shows, many edgier (Homeland, American Horror Story).

Levin acknowledges that the media companies feel compelled to get larger to combat growing competition from such distributors as the proposed Comcast-Time Warner Cable and AT&T-DirecTV, both of which are awaiting government approval. But he points to a further complicating factor in the Fox culture -- the mercurial Murdoch. "Rupert is extremely bright," he says. "But if you cross somebody at Fox, you cross Murdoch. It's off with your head. And so, there's also that kind of financial gun held to people's heads." Fox, for instance, is home to the right-leaning Fox News, while Time Warner's CNN and HBO tend to feature left-leaning programming (CNN would be sold in a Fox deal).

Others contend that the differences between the two studios have been exaggerated. Certainly, a current Fox hit like Dawn of the Planet of the Apes, costing $170 million to produce, would not look out of place on the Warners slate.

And in some ways, a merger could benefit the two movie studios. Even if some future Fox-TW entity kept its existing film units separate, it might merge its marketing and distribution operations, both domestically and internationally. The two studios currently compete head-to-head for key playdates around the world, and that influences the movies that get made. "Much of creative development is about winning that opening weekend, which is why you have more X-Men, more Hobbits, more Batmen. That is bad for filmmakers," one exec argues. But if the newly merged company had more control over where it placed its bets on the calendar, "you could program better," he says. And that, in turn, could lead to more confident counterprogramming and, potentially, riskier filmmaker-driven movies like Fox's The Fault in Our Stars or Warners' Gravity. As for the two studios' marquee properties, some execs are fantasizing about a future in which Fox's X-Men crossed over into a movie with Warners' DC Comics characters like Batman.

Within the TV ranks, though, where Warners is the industry's biggest player, with its stable of blue-chip producers like Chuck Lorre and J.J. Abrams, few are greeting the prospect of a Fox takeover with any enthusiasm. Both Warners and 20th TV develop hundreds of scripts each year and sell shows to all broadcast and cable networks. But a merger could diminish the volume of development, which would translate into fewer jobs for writers, producers and actors and layoffs for executives. (A merger also could result in top projects being channeled to the Fox network from both WBTV and 20th TV, whose chiefs Dana Walden and Gary Newman recently expanded oversight to include Fox.)

Consolidation on the TV side also likely would further the current trend toward talent developing scripts outside the traditional studio systems via upstarts like MRC (House of Cards), Gaumont (Hannibal), Alcon (Syfy's The Expanse) and more. These companies fund development, package projects and then take them to market, and more of them likely would spring up if Warner Bros. or 20th TV decreased output. One top agent predicts that the current merger uncertainty could even inhibit development at both studios. "Creative people don't want to go in and pitch until they see what is happening," the agent says. "At Fox right now there is a wait-and-see attitude; and to some extent with [Time Warner's most watched cable net] TNT because we want to make sure we know what is going to happen there."

Few can predict how the various networks would coexist. Speculation is that Fox would use Turner's lucrative sports licensing deals for the NBA and Major League Baseball to better position its Fox Sports 1 network to compete with Disney's ESPN.

Many creatives, acknowledging that the merger talk is far above their pay grade, are adopting a wait-and-see attitude. "Right now, I don't think there's any impact on anything that's going on during what I'd call an intense period of speculation," cautions UTA co-founder Peter Benedek. "Until such time as the people you're selling to are different, there's no difference."

But writer Tom Fontana, of TV's Oz, who has two limited series in development at Fox, expresses what might be the prevailing feeling in Hollywood: uncertainty mixed with skepticism. "I'm not business-savvy enough to fathom the full impact of a potential Time Warner-Fox merger," he says. "But whenever Mr. Murdoch is involved in anything this substantial, I go to Mass."